Shares of Apple (symbol AAPL) have achieved just about every superlative imaginable. They have popped 8% since the company issued its blowout earnings report on January 25 for the November-December quarter. They've quintupled over the past three years and soared 37-fold over the past decade, a generally lackluster period for stocks. Apple has taken a clear lead over ExxonMobil (XOM) for the title of world’s most valuable company. Yet despite all that, Apple shares are amazingly cheap.

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Let's start with Apple's price-earnings ratio. At its February 2 close of $455.12, the stock sells at 11 times analysts' average estimated earnings of $42.14 per share for the fiscal year that ends this September. By contrast, Standard & Poor's 500-stock index sells for 13 times estimated 2012 earnings, and the stocks in the index are growing much less slowly than Apple. The Cupertino, Cal., company also looks cheap compared with other technology giants. For example, Google (GOOG) sells for 14 times estimated 2012 earnings, and Amazon.com (AMZN) trades for a whopping 134 times earnings. "Apple's revenue and earnings have grown even faster than the stock price in the past few years," says analyst James Ragan, at Crowell Weedon & Co. in Los Angeles. "On a P/E multiple basis, the stock is actually cheaper today than it was a few years ago."

Compare Apple's valuation with the company's growth rate and the stock looks even more compelling. Over the past five years, Apple's earnings have grown at an annualized pace of 61%. Divide Apple's P/E by its growth rate and you get an absurdly low price-earning-to-growth-rate ratio, or PEG ratio, of 0.18.

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Of course, analysts and other pros always look ahead. On average, they predict that Apple's earnings will grow 19% annually over the next three to five years. Using that figure, Apple's PEG ratio is a still-low 0.58. If Apple traded at a PEG ratio of 1, a reasonable figure for a company of this might and quality, the stock today would fetch about $800 (19 times this year’s estimate of $42.14 per share).

All of this begs the question: Why would a company that's doing this well be selling this cheaply? The answer lies in a mountain of worries about Apple's future. Let's look at these investor concerns one at a time and assess how serious they are:

David shouldn't be bigger than Goliath. Some find it impossible to justify Apple's position as the world's most valuable company. After all, Exxon, the company Apple supplanted as number one by market capitalization, rakes in four times the revenue. But sales aren't all that matters. Sales are only important to the degree that they can be translated into profit. And few companies drop the value of a sale to the bottom line as effectively as Apple.

Profit margins, and returns on assets and equity, are the financial figures that tell this tale. So let’s compare Exxon and Apple side-by-side:

Net profit margin: Exxon, 10%; Apple, 26%.

Return on assets: Exxon, 11%; Apple, 24%.

Return on equity: Exxon, 27%; Apple, 46%.

If that's not enough, Exxon also carries some $16.8 billion in debt, while Apple is debt-free and has an obscene amount of cash on its balance sheet (more about that later).

Growth must slow. Yes, Apple's growth will eventually slow. The company's earnings grew at an annualized rate of 61% over the past five years. Analysts predict that earnings will rise "only" 19% over the next three to five years. But consider this: Three years ago, Apple posted annual sales of $42.9 billion and profit of $8.2 billion -- pretty snazzy numbers. Now, the company is roughly three times bigger. In fact, its December-quarter revenue and earnings dwarf full-year results from 2009, with net profit of $13 billion, or $13.87 per share, on revenues of $46.3 billion.

And analysts now may be underestimating Apple's future growth because the company has yet to tap the world's rapacious demand for smart phones. Apple is now taking its phones to the global market, where it has a relatively small market share. And with China's huge market in particular still beckoning (Apple currently has a deal with only one Chinese carrier), the company's future growth rate could continue to surprise.

Competitors are gaining. Apple operates in highly competitive markets, where other global technology giants -- from Google to Amazon -- are nipping at its heels. Indeed, last year, Samsung (which uses Google's Android technology to run its phones) became the biggest manufacturer of smart phones, according to technology research firm Strategy Analytics. Apple regained the number-one spot in the December quarter by selling an astounding 37 million iPhones, but its edge was slim. In the tablet market, Amazon's newly minted Kindle Fire has sold millions of units, thanks partly to its bargain-basement price of $199 -- about 60% less than the cost of an entry-level iPad.

While these are legitimate competitive threats, they're unlikely to deliver even a glancing blow to Apple for a couple of compelling reasons. For starters, the overall smart-phone market is growing so rapidly, Apple's phone sales could grow by double-digit percentage rates, even if it lost market share.

The same holds true for tablets, where the market is expected to grow at a 56% compounded rate for the next five years, according to a recent report by Infinite Research, a technology research and consulting firm. And here, despite Amazon’s aggressive efforts, Apple continues to have an edge. The company sold more than 15 million tablets in the December quarter and is likely to come out with an update -- the iPad3 -- this year. If past practice proves true, Apple will continue to sell the older model but at a reduced price that will provide tough competition for the Kindle. Microsoft is expected to debut a tablet this year, too. But Apple is still expected to continue to dominate the tablet market this year.

Moreover, fans of Apple phones and tablets have created such a "halo effect" for the company's products that even Apple's personal computer sales are growing. The company sold 5.2 million Macintosh computers in the December quarter, up 26% from the same period a year earlier. Rumor has it that the company will announce an Apple television set -- presumably iTube -- in coming months. And that doesn't take into account that Apple also sells "apps" and music through iTunes and data storage through the iCloud. This isn't a one-horse show anymore. "Apple has really been the leading company in the wireless revolution," says Ragan. "It has been able to create some huge markets and maintain a dominant position in them."

Apple could misuse its cash. In addition to having no debt, Apple holds a massive pile of money -- about $97 billion in cash and investments, which amounts to some $103 per share. In today's market, short-term investments, which make up about half of this stockpile, earn nothing. The presumption is that the company will deploy these assets relatively soon, which can spark fears that the company might squander the money. This might be a concern with other tech giants. But, historically, it hasn’t been a problem here. Apple tends to make relatively modest acquisitions -- the type that cost millions, not billions, of dollars. And its deals have usually proved to be sage moves in supporting the development of better products. Consider, for example, Apple's purchase in 2010 of Siri, which became a major feature of the iPhone 4s. The terms of the deal weren’t disclosed, but experts believe Apple paid about $200 million. Meanwhile, Siri has made talking to your phone almost as popular as talking on your phone.

The new boss is untested. There's no doubt that filling Steve Jobs's shoes is a tough task. But analysts contend that Apple's executive bench is deep and impressive. Certainly, the company's recent results should win new CEO Tim Cook the benefit of the doubt. Moreover, while product development might eventually be tested, the company has a host of products already in development that are likely to fuel sales for several years to come.

Indeed, Apple analysts are so sold on the story -- particularly after seeing those December-quarter results -- that they have since been scrambling to revise both earnings estimates and target prices for the stock. Sterne Agee analyst Shaw Wu now expects the company to sell for $550 by this time next year -- a 21% premium over today’s prices. Stephen Turner, technology analyst at Hilliard Lyons, expects the stock to hit $575; Ragan is betting on $600. Shebly Seyrafi, technology analyst at FBN Securities, says $650, while Hudson Square Research is calling for a $700 target price.

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